Retail Guarantee Standard Terms and Conditions

Revised: 01 October 2007

1.                 HGC shall guaranty payment of the balance outstanding and due on the principal obligation plus interest and yields.  The extent of the guaranty cover is based on the type of housing package, as follows:

 

2.                Upon application for Guaranty Line, the guaranteed entity must indicate/specify its preferences as to the type of guaranty coverage it shall avail for its line. A guaranteed entity may choose to be covered in either of the following:

a.) Standard Coverage - HGC shall pay in the form of debenture bonds should      default occur within the first five(5) years of guaranteed obligation, and in the      form of cash if default occurs after the first five(5) years of the guaranteed      obligation.

b.) Pure Bond Coverage - HGC shall issue debenture bonds as payment for any      retail guaranty claims regardless of when default occurs during the term of      the guaranteed obligation.

3.                 The debenture bonds to be issued as guaranty payment shall have a maturity of ten (10) years after date on which the debentures are issued or three (3) years after July 1st following the maturity of the mortgage or the loan, whichever is shorter. The coupon on the bonds shall be set at the lowest of (A) Market Benchmark (MART-1 or its alternative market benchmark), (B) Mortgage Rate of the account subject of call payment, or (C) HGC Guaranteed Rate of 8.5% per annum at the time of issuance. However, the tax exempt rates are limited to the guaranteed interest rate of the loan. The interest on the bonds is payable semi-annually and the principal amount upon bond maturity.

 

4.                 The aggregate amount of housing loans to be guaranteed by HGC under the retail guaranty line shall not exceed the approved line granted to the Funder/Entity at any point in time provided that enrollments accepted by HGC are within the approved guarantee allocation as follows:

 

-                      at least 40% shall cover Socialized Housing;

-                      at least 30% shall cover Low-Cost Housing;

-                     at least 20% shall cover Medium-Cost Housing;

-                      no more than 10% shall cover Open Housing;

 

5.                   The principal loan value for guaranty coverage shall not exceed:

 

 

of the appraised value of the property subject of the loan based on an appraisal which must be in accordance with HGC's appraisal guidelines and standards or a loan amount whereby the borrower's gross monthly payment/amortization should not be more than 40% of his net disposable income, whichever is lower. For this purpose net disposable income shall be defined as the gross verifiable monthly income less statutory deductions and long term loans.

 

The respective loan ceilings for socialized low-cost, medium-cost and open housing packages shall be determined by the Housing and Urban Development Coordinating Council and the National Economic and Development Authority and may be revised to conform to prevailing economic conditions.

 

6.                 The interest income and yields earned on loans guaranteed shall be exempt from all forms of taxation as follows:

 

-                     11% for Socialized Housing;

-                     10% for Low-cost Housing;

-                     9.5% for Medium-Cost Housing;      

-                     8.5% for Open Housing.

 

7.                  A loan granted by the guaranteed entity shall be eligible for guaranty if it meets the following requirements :

 

1.                 Purchase or lease of house and lot, townhouse, condominium unit and any other single family dwelling;

2.                 Purchase of lot and construction of house;

3.                Construction of house on lot already owned;

4.                 Purchase of lot only;

5.                 Purchase of lot on which the house of the borrower presently stands;

6.                 Major repair, improvement or expansion of an existing house or dwelling unit; 

7.                Refinancing of an existing loan which was used exclusively for any of the purposes enumerated above;

8.                 Contracts-to-Sell executed by the guaranteed entity's developer-clients in favor of its buyers covering purchase of residential units in a fully developed subdivision.

 

8.                 Collateral/Security:

 

For Mortgage Loans:

 

                 

            a.        First Mortgage lien on the real estate property and the improvements thereon subject of                        the loan.

 

             b.       Other rights in REM including leasehold rights under a contract of lease for not less than                        twenty (20) years from the date the guaranty was executed.

 

            For CTS accounts - The account is covered by a Deed of Assignment of Rights under the CTS             and the underlying property/s by the Developer in favor of the guaranteed entity. Transfer             Certificates of Title subject of the CTS accounts should be under the custody of the guaranteed             entity.

            

9.                 Location of the property - The property subject of Real Estate Mortgage or Contract-To-Sell must be located in a developed subdivision or in an area that is classified as residential, near centers of business, commerce and employment or means of livelihood. Said property must be directly accessible by transportation facilities through developed roads or right of way, and must have direct access to permanent power and water facilities as well as sewerage and drainage systems.

 

The subdivision where the property is located must be developed in accordance with standards and technical requirements provided under Batas Pambansa Blg. 220, Presidential Decree No. 957 and other laws, rules and regulations governing land development.

 

 

10.              Loans up to a maximum term of thirty (30) years may be enrolled for guaranty coverage.

 

11.            The guaranteed entity shall enroll loans for HGC guarantee coverage in batches of at least ten (10) individual accounts or P 1 Million worth of accounts.

 

12.             The guaranty premium based on the outstanding principal obligation on the loan shall be as follows:

 

 

Premium discount may be granted to banks with outstanding guarantees as follows:

 

Outstanding Guarantees                 Discount Rate

P3.0 Billion and above                         15 basis points
 P5.0 Billion and above                         20 basis points 

 

            The bank shall likewise meet the following eligibility to qualify for premium discount:

 

            a.  The bank should warrant that the premium is shouldered by the bank;

            b.  No calls were made on the guaranty;

            c.  Required volume of lending for socialized housing or alternative compliance has been met;                  and

            d. The interest on loans imposed by the bank belongs to the lowest three in the market per                  HGC's monitor of interest rates.

13.             Upon enrollment/renewal of Retail Loans for guarantee, the guaranteed entity shall issue the following warranties:

 

a.                 The guaranteed institution has undertaken all requisite credit investigation, appraisal and credit analysis in approving the loan in accordance with HGC's evaluation procedures and guidelines.

 

b.                 The title(s) of the collateral to the guaranteed loan should be free from all liens, charges, claims, and other encumbrances other than the one constituted in favor of the guaranteed institution.

 

c.                 Loan-to-Value (LTV) Ratio on the property being financed shall not exceed:

 

-   (100%) of appraised value for Socialized Housing Packages

-  (90%) of appraised value for Low-Cost Housing Packages

-   (80%) of appraised value for Medium Cost Housing Packages

-   (70%) of appraised value for Open Housing Packages

Appraisal of the property must conform with the HGC's appraisal standards.

 

d.                 The guaranteed loan, including the original loan in case of refinancing, is in current status or not in payment default prior to its initial enrollment/renewal for guaranty coverage.

 

e.                 The loan is covered by Mortgage Redemption Insurance and the collateral is likewise secured by Fire Insurance.

 

f.                  The guaranteed institution has notified the borrower that the loan is covered by HGC's guarantee.

 

g.                 The guaranteed entity shall perform the accounts management and supervision functions to ensure compliance to HGC's standard terms and conditions for retail guaranty line.

 

h.                 The guaranteed entity has notified the borrower that the loan is covered by an HGC guaranty.

 

i.                   In case of the default, the bank shall warrant that the borrower is in default and copies of the demand letters were accordingly delivered to the borrower which shall be stated in the notice of guaranty claim for guaranty benefit.

 

The following additional warranties are required for loans documented via Contracts-To-Sell (CTS):

j.                The required minimum downpayment on the selling price has been paid by the buyer in accordance with the following housing package, to wit:

k.                 The housing unit subject of the CTS is fully finished;

l.                The guaranteed institution shall receive direct payments of the receivables from the CTS buyers that have been assigned to the guaranteed institution. However, the guaranteed entity may delegate the collection of receivables to the developer or other party. HGC shall require that the same be covered by a Servicing Agreement or similar device, a copy of which shall be submitted to HGC.

 

m.                The Deed of Assignment of Rights under the Contract-To-Sell and the underlying property subject of the Contract-To-Sell executed by the developer in favor of the bank shall be registered with the appropriate registry of deeds and annotated on the title of the property subject of Contract-To-Sell upon call on the guaranty. Titles of the property shall be under the custody of the BANK.

 

n.                 In case of default within the two (2) years of the guaranty coverage, the guaranteed entity may exercise the following options:

 

1)     Any defaulting account shall be substituted by an account of current status;

 

2)    Buy-back arrangement with the Developer for a minimum of two (2) years.

 

                  Call on the HGC guaranty may be exercised after the two-year seasoning period in which case, the CTS shall be rescinded and the title shall be assigned and consolidated in the name of HGC. The Funder shall likewise submit the following:

 

a)     a certification that there are no pending claims under the Maceda Law on the properties to be assigned to HGC; and,

 

b)    a certification that the property subject of the Contract-To-Sell is vacated by the previous owner upon assignment  to HGC.

 

14.             The guaranteed entity has the option to renew the guarantee coverage for the second and subsequent years. Upon due and timely payment of the annual guarantee premium and upon execution of the warranties, HGC shall consider the guarantee coverage automatically renewed and in full force and effect.

 

15.              A grace period of thirty (30) calendar days from anniversary date shall be allowed for the payment of the annual guarantee premium. However, should the renewal be made after the 30-day grace period, a 3% per month penalty shall be imposed on the insurance premium.

 

16.             Updated or restructured loans may be re-enrolled for guaranty coverage subject to payment of higher premium fees.

 

          a.      Higher premium rate equivalent to an additional 1/4% from the regular rate for          restructured accounts. The premium rates from the re-enrolled accounts may          be reverted back to the regular rates after one year of coverage.

 

          b.      Fully updated accounts may be eligible for enrollment provided there is warranty          from the guaranteed entity.

 

17.          The guaranteed entity shall be entitled to the guarantee benefit upon failure of the mortgagor/borrower to pay a consecutive six (6) monthly amortizations due (principal and interest).

   

18.             The request for payment of the guarantee benefit shall be submitted by the guaranteed entity to HGC within thirty (30) calendar days from date of borrower's default provided the guaranty coverage is still in effect. In the event the account defaults on the last day of the guaranty coverage, the guaranteed entity must file its notice of claim immediately on the following day. A joint site inspection of the property subject of guaranty call shall be made by HGC and the guaranteed entity immediately after filing of request for guaranty benefits.

 

          For accounts with HGC Certificate of Completion & Appraisal (COCA), copy of which shall be attached to the call documents upon filing of call, appraisal/inspection of the property subject of call shall no longer be a pre-requisite in the evaluation of the same. However, said accounts shall also be subjected to inspection and appraisal to apprise HGC Management of the present valuation and status of the property.

 

          Failure to convey the documents within the prescribed 180 calendar days shall render the call approval cancelled.

 

19.             A maximum of thirty (30) calendar days from receipt of HGC's letter of approval shall be allowed for the guaranteed entity to send the documents subject of the guaranty payment. Should HGC receive the abovementioned documents within thirty (30) calendar days of the Bank's receipt of HGC's letter of approval, the guaranteed interest shall be computed up to the actual date of payment.

 

Should the conveyance of the same exceed the prescribed period, but not to exceed 180 calendar days from the Bank's receipt of the notice of approval of claim, the corresponding interest shall be limited to nine (9) months starting from the day immediately following the application of the borrower's last payment on his housing loan.

 

The property subject of the CTS should be vacated by the previous buyer upon assignment to HGC.

 

20.            HGC shall have the right to inspect the mortgaged property and, in appropriate cases, the progress of construction, as well as all records pertaining to any guaranteed loan to satisfy itself of compliance with its requirements.

  

21.             HGC shall have the option to audit the individual borrower's loan document enrolled against the retail guarantee line.

 

22.             The guaranteed entity will be given six (6) months from approval of the guaranty line to build-up the accounts for enrollment. If the approved line remain unutilized after the prescribed period of six (6) months, HGC shall either cancel the guaranty line or charge the commitment fee thereafter.

 

          Under the former option, the balance on the commitment fee may still be considered future premium credits for a maximum period of one (1) year. After the lapse of one (1) year, any remaining unavailed balance of said line shall be cancelled and the corresponding balance of the commitment fee shall be forfeited. In which case, the account shall be considered inactive. The same may be activated by re-applying for guaranty coverage and submission of HGC's standard requirements for line applications.

 

 

23.            The commitment fee to be charged shall be 1/10 of 1% of the amount of unutilized portion of the guaranty line. The commitment fee corresponding to the utilized portion of the line may be converted/credited as premium fee in direct proportion to the amount of guaranty availment. The formula for crediting the amount of premium for every enrollment shall be based on the following:

 

                                        Amount Enrolled

Premium Credit    =    --------------------------------    x       commitment fee

                                     Retailed Guaranty Line

 

 

24.            Twenty percent (20%) of the approved retail guarantee facility shall cover socialized housing packages of 300,000 & below. Alternative forms of compliance may be any one of the following:

 

          a.     Investment in the Socialized Housing Bonds. For purposes of compliance, the         amount or proportion of investment should generate the equivalent number of         housing units if direct lending is resorted by the bank.

 

          b.     Provide a credit facility for developmental loans for subdivision projects         specifically catering to low cost and socialized housing packages;

 

          c.     Participation in the MWLP either as Funder or Lending Window.

               

               

25.           No assignment of rights shall be made by the guaranteed entity without prior written consent of HGC.

 

26.             HGC shall be reimbursed of all actual and reasonable out-of-pocket expenses (such as transportation, food and lodging) incurred by the latter whenever it undertakes pre-audit or post-audit examination or inspection outside of the boundaries of Metro Manila.

 

27.              The guaranteed entity shall regularly submit to HGC the total amount of annual tax exemptions or credits derived from its guaranteed accounts as reported to the BIR.

  

28.              HGC may cancel the line/guaranty under any of the following circumstances:

 

a)     Audit of the line indicate violations against the warranties issued.

b)    The credit evaluation and guidelines and procedures of the guaranteed entity are no longer acceptable to HGC.

c)     The guaranteed entity is unable to perform the accounts management and credit supervision functions required by HGC.

d)     The guaranty has been unavailed for six (6) months.

e)     The guaranteed entity has been declared insolvent or has filed for suspension of payment with the Securities and Exchange Commission or other appropriate government agencies.

f)      If call payments reach 50% of premium received, an actuarial assessment of the line will be conducted to consider credit risk underwriting and premium structure.